Blog Post Excerpts

Maybe a phone call suggesting a defensive reallocation in your portfolio might be warranted from/to your advisor. There is a body of work from Guggenheim http://bit.ly/1iH0M2Q that suggests in a more significant decline asset classes may correlate (they go down together) which gets in the way of diversifying away risk in your portfolio. Even computer driven (Robo Advisors) may find challenges in periods of heightened volatility http://bit.ly/1j0rK5A

“If it is not possible to determine market condition, I suggest vigilance and a reasonable stop loss strategy.Sometimes allocating to cash with a solid reentry discipline can be a viable strategy too.”

The research from Guggenheim further suggests, I will quote directly-“After 2008, many investors suggested that diversification stopped working. We believe this suggestion is incorrect and is premised upon a misunderstanding of how asset class diversification works. Most asset classes possess little inherent diversification quality. Their diversification benefits are derived from buyer and seller behavior, which can change over time. Diversification did not stop working in 2008; buyer and seller behavior adapted to evolving financial markets.” You might want to read that paragraph again.

“If it is not possible using a retirement calculator to determine market condition and an appropriate portfolio strategy for that market condition, vigilance and a reasonable stop loss strategy may help remedy this retirement calculator failure.”

I thought it was important enough to re-title the blog post and republish and bullet point the key takeaways.

Retirement calculators used to determine asset allocation may not keep a retirement portfolio from losing value as some might presume

Retirement calculators may miss the effects of an interest rate increase on a bond allocation or fail to calculate the increase in longevity of the retiree.Many retirement portfolios and retirees can ill afford an increased degree of volatility.

Retirement calculators may well be ill equipped to adjust in a timely fashion to investor behavioral changes.

If it is not possible using a retirement calculator to determine market condition and an appropriate portfolio strategy for that market condition, vigilance and a reasonable stop loss strategy may help remedy this retirement calculator failure.

Sometimes allocating a portion to a money market with a solid reentry discipline can be a viable strategy too.

If you are uncomfortable and worrying about the market, sell aggressive positions down to your sleep at night levels.

Consider short or 1x inverse instruments.

Consider an allocation to a precious metals asset class.

If you are still unsure about your asset allocation strategy in light of the information presented you should call Bob at RS Asset Management, probably now, while you are thinking about it, for a free one-hour consultation. We can talk about your situation in detail, its free and confidential. Call 719-219-8444.

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